ACIT, CIRCLE-1(2), SURATQ V. SETU CONSTRUCTION, SURAT

ITA 24/SRT/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1544 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-07-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 30-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS; Set aside; FORM 26AS
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A.L.SAINI, AM आयकरअपीलसं./ITA No.24/SRT/2020 (िनधाŊरणवषŊ / Assessment Year: (2013-14) (Virtual Court Hearing) Assistant Commissioner of Income- tax, Circle-1(2), Room No.213, 2 nd Floor, Aayakar Bhawan, Majura Gate, Surat-395001 Vs. M/s Setu Construction G-4, Saifee Complex, Udhna Navsari Main Road, Opp. BRC Udhna, Surat – 394210. ̾थायीलेखासं./जीआइआरसं./PAN/GIR No.: ABUFS 7453 G (Assessee ) (Respondent) Assessee by : Shri Kiran K Shah, C.A Respondent by : Shri Vinod Kumar– Sr.DR सुनवाई की तारीख/ Date of Hearing : 12/07/2022 घोषणा की तारीख/Date of Pronouncement : 06/10/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the Revenue, pertaining to assessment year 2013- 14, is directed against the order passed by the Learned Commissioner of Income Tax(Appeals)-2, Surat [‘Ld. CIT(A) for short] dated 19.11.2019, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961, (hereinafter referred to as ‘the Act’) dated 29.12.2015. 2. Grounds of appeal raised by the Revenue are as follows: “1. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has justified in deleting the addition made on account of undisclosed contract receipts made by the AO ignoring the fact that contract receipts as per TDS certificate was not disclosed in its return of income for the A.Y 2013-14 even though corresponding TDS were claimed against the tax credit for the year under consideration? 2. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has justified in deleting the addition made on account of undisclosed contract receipts made by the AO as per the TDS claimed, ignoring that assessee is consistently following mercantile system of Page | 2 ITA No.24/SRT/2020 A.Y. 13-14 M/s Setu Construction accounting and there is no change in the method of accounting followed by the assessee for A.Y 2013-14 with respects to that of the preceding assessment years, whereby the assessee is required to offer the contract receipts on accrual basis as per TDS deducted. 3. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of Assessing Officer may be restored to the above extent.” 3. Brief facts qua the issue are that assessee is a contractor and carried out contract work with labour. During the year under consideration, the assessee has claimed Tax Deducted at Source (TDS) credited of Rs.10,31,551/- with the return of income. On verification of the TDS certificates, it was noted by AO that total contract receipts as per TDS certificates are Rs.5,35,77,554/-. However in the profit and loss account, the total contract receipts from the two parties namely M/s Anjani Developers and M/s Lap Developers (P) Ltd, shown received at Rs.4,57,79,940/- and Rs.1,45,00,000/- respectively. The details are given below: S.No. Name of the party Amount 1 M/s Anjani Developers Rs.3,90,77,554/- 2 M/s Lap Developers Rs.1,45,00,000/- Total Rs.5,35,77,554/- Thus, there is a difference of Rs.77,97,614/- was noticed in total contract receipts received by the assessee for the year under consideration. Hence, the assessee has offered the contract receipts less by Rs.77,97,614/-. In this case, the Pr.CIT, Surat has provided an opportunity of being heard to offer explanation, if any from assessee by issuing notice on 05.01.2018. However, assessee has failed to avail the same. Nobody was attended or no reply was filed by the assessee. In response to the second opportunity provided to the assessee on 20.03.2018 by the Ld. PCIT, Surat-1 the assessee has submitted a reply wherein the assessee has reconciled the difference noticed in the contract receipts which is reproduced as below: Page | 3 ITA No.24/SRT/2020 A.Y. 13-14 M/s Setu Construction 4. Therefore, AO has issued notice to the assessee under section 142(1) of the Act. In response, the assessee submitted its reply dated 24.11.2018, before the AO. The AO after considering reply of the assessee held that assessee is maintaining books of account on mercantile basis. The Section 2 of the Income Tax Act, provides definition of assessment year, which means the period of 12 months commencing on 1 st day of April of every year. Every assessment year is a different assessment year and the assessee is required to pay taxes on the income earned year-wise. Moreover, in the audit report of the assessee for the financial year 2012-13 relevant to the AY.2013-14, it is clearly mentioned that there is no change in method of accounting. Therefore, as per the submission made by the assessee, it is maintaining accounts on mercantile basis and is therefore liable to be taxed on the income accrued or generated during the year. Therefore, AO held that since the assessee is following mercantile system of accounting, it is assessee’s duty to declare all credits as per mercantile system from the details filed by the assessee, it was observed by AO that there is a negative difference of Rs.77,97,614/- for the A.Y 2013-14. Hence, it is very much require to bring the difference amount to tax during the year under consideration. Therefore, undisclosed receipts of Rs.77,97,614/- determined as above was added to the total income of the assessee. 5. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before Ld. CIT(A) who has deleted the addition made by the Assessing Officer. Aggrieved, the Revenue is in appeal before us. 6. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. However, ld Counsel for the assessee defended the order passed by the ld CIT(A). We note that during the appellate proceedings, assessee has challenged the Page | 4 ITA No.24/SRT/2020 A.Y. 13-14 M/s Setu Construction addition of Rs.46,32,928/- made by the AO on account of difference in contract amount as per 26AS and the amount shown in the books of accounts. In the set aside assessment order u/s 143(3) r.w.s. 263 of the Act, the AO noted that the assessee had shown contract receipts of Rs.78,67,072/- from M/s Anjali Developers whereas the form 26AS data indicated TDS deducted on contract amount of Rs.l,25,00,000/-. Although assessee had explained, the reasons for the difference in contact value shown at Rs.78,67,072/-, the AO proceeded to make the addition on the ground that the assessee following mercantile system of accounting, the said receipts as per form 26AS should have been declared. The assessee submitted during the appellate proceedings that the discrepancies arose due to TDS on incorrect amount by the party M/s Anjali Developers for whom contract work was executed for assessment years 2012-13 and 2013-14 (current A.Y.). The assessee has shown from the copy of form 26AS for A.Y. 2012-13 and A.Y. 2013-14 that the party M/s Anjali Developers (contractee) had deducted tax on actual payments of Rs.2,46,47,940/-. In A.Y. 2012-13 and Rs. l,25,00,000/- in A.Y.2013-14, as against actual contract work of Rs.3,38,77,499/- in A.Y.2012-13 and Rs.78,67,072/- in A.Y. 2013-14 (current A.Y,). The assessee has also shown from its P & L A/c for A.Y. 2012-13 that the actual contract bill raised for Rs.3,38,77,499/- was already reflected in the total sales turnover of Rs.8,84,66,677/-credited in the P & L A/c of A.Y. 2012-13. Thus, it was contended that even though the contractee had made payment of Rs.2,46,47,940/- (TDS on this amount only), the assessee had accounted for Rs.3,38,77,499/-. The outstanding amount of A.Y. 2012-13 paid by M/s Anjali Developers along with current A.Y. contract amount was subjected to TDS on payment basis leading to the confusion regarding the treatment of contract receipts. 7. Based on these facts and after going through the break- up of sales turnover of assessment year 2012-13, the ld CIT(A) noted that assessee had already credited receipts of Rs.3,38,77,499/- in the return of income (ROI) and Profit and Loss account of A.Y. 2012-13, even though form 26AS TDS deduction indicated receipt of Rs.2,46,47,940/- from M/s. Anjali Developers. Thus, the outstanding payment, of A.Y. 2012-13 subjected to TDS on payment basis by the contractee Page | 5 ITA No.24/SRT/2020 A.Y. 13-14 M/s Setu Construction M/s Anjali Developers stand taxed in A.Y. 2012-13. Therefore, there is no case for addition of Rs.46,32,928/- on the basis of form 26AS as unaccounted contract receipts for current A.Y. Therefore, ld CIT(A) deleted addition of Rs.46,32,928/-. 8. About the addition of Rs.11,64,686/- on account of tax wrongly deducted on amount of service tax and VAT. The ld CIT(A) noted that in the assessment order, the AO noted that there was difference in contract receipts as per form 26AS for M/s Lap Developers and the amount shown by the assessee in its P & L A/c amounting to Rs.11,64,686/-. The AO did not accept the assessee's reply during assessment proceedings and added the same amount as undisclosed receipts. In the appellate proceedings, the assessee has shown from the documentary evidence that the Contractee, M/s. Lap Developers had incorrectly deducted TDS on amounts pertaining to service tax and VAT of Rs.11,64,686/- also. Thus, it was claimed that the contract receipts of Rs.3,79,12,686/- from M/s Lap, Developers was rightly shown in P & L A/c as against form 26AS figure of Rs.3,90,77,554/-. Thus, ld CIT(A) after considering the facts evidenced by documentary evidence of contract amount of only Rs.3,79,12,868/-, there is no case for sustaining addition of Rs.11,64,686/- pertaining to service tax and VAT as undisclosed receipts. Hence, the addition of Rs.11,64,686/- was deleted by ld CIT(A). 9. About the addition of Rs.20,00,000/- on account of incorrect assuming of contract amount from form no. 26AS, as undisclosed contract income. In the assessment order, the AO took total contract receipts of Rs.5,35,77,554/- as per form 26AS of current A.Y. 2013-14. On the other hand, the assessee has shown that the total contract amount as per form 26AS comes to Rs.5,15,77,554/- only and thus, there was arithmetical mistake on the part of AO in making addition of Rs.20,00,000/- ( Rs.5,35,77,554- Rs.5,15,77,554). Therefore, ld CIT(A), considering the facts from 26AS, noted that total receipt as per form 26AS of current AY is only Rs.5,15,77,554/- Hence, the addition of Rs.20,00,000/- was deleted by ld CIT(A). This way, ld CIT(A) deleted the total impugned addition of Rs.77,97,614/- (Rs.46,32,928 + Rs.11,64,686 + Rs.20,00,000). Page | 6 ITA No.24/SRT/2020 A.Y. 13-14 M/s Setu Construction 10. We have gone through the above findings of ld CIT(A) and noted that during the appellate proceedings, the assessee submitted the reconciliation of TDS figures, which were considered by ld CIT(A) in the context of Form No.26AS. In some cases there was arithmetical mistake on the part of AO in making addition of Rs.20,00,000/-, which was noted by ld CIT(A) and accordingly addition made by the assessing officer were deleted by ld CIT(A). We do not find any error in the conclusion reached by ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 11. In the result, the appeal of the Revenue is dismissed. Order is pronounced on 06/10/2022 by placing the result on the Notice Board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat/िदनांक/ Date: 06/10/2021 Dkp Outsourcing Sr.P.S./SS Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat